In 1981, the actress Jane Birkin boarded an Air France flight to London. She didn’t know it at the time, but Birkin had taken her seat next to Jean Louis Dumas, the chief executive of Hermes, a French maker of luxury goods. This chance encounter would lead to the creation of a product which would call into question a supposed ‘law’ that is one of the first things that budding economics students the world over are taught as gospel.
Economics students are taught from very early on about the law of demand. As the price of a product increases, this discourages people from buying it in such large quantities and so the quantity demanded for the good goes down. This fundamental law underpins one of the most basic diagrams in economics - the demand curve.
This would seem to be perfectly logical to most people. When price of a product is high, all other things being equal, consumers are less likely to be willing (or able) to part with their cash in order to purchase it, so the quantity demanded is low. As the price comes down, increasing numbers of consumers are priced into the market and the quantity purchased will rise.
So where does Jane Birkin fit into this? On that flight to London, when her belongings fell out of her bag, Birkin began discussing with Dumas the specifications for her ideal handbag. She even made out sketches on the in flight sick bags. A few years later, the Birkin bag was born in the iconic design, with two rolled handles, a flap top and lock closure. While not an instant hit, by the 1990's the bag had become a symbol of status and the quintessential fashion accessory. Prices in 2025 range from around $10,000 up to $60,000, with the most expensive ever to be sold at auction going for $450,000.
The reason that this story is of such interest to economists, is that the Birkin Bag could be studied as a possible example of a product which contradicts the law of demand. What if the high price of the Birkin is part of what gives it such an appeal as a status symbol? In this case, rather than reducing quantity demanded by making them less affordable, increasing prices would actually drive further sales. Economists refer to these highly rare examples as Veblen goods, where the exclusivity and perceived social value of the good turn the law of demand on its head. In this case, the demand curve would become upward sloping, reflecting the direct, rather than inverse relationship between price and quantity demanded.
Birkin would take advantage of this by operating waiting lists and actually making it more difficult to purchase their bags. It would become a case of who you know - working your way up through relationships with sales executives or requiring recommendations to access certain models. The harder it is to get hold of something, the more people want it, which drive the higher prices and, in the long term, even more sales.
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